So I know there are an increasing number of folks coming on board with Rogoff idea that what we need is a burst of inflation. I think the – very true – idea that this will help repair household balance sheets is behind this.

However, looking at the following chart is anyone yet persuaded that 2% inflation is just a bad idea; and that 4% gives us fundamentally more breathing room.

Perhaps we can countenance a 0% overnight rate, but doesn’t make you at least a little queasy to see the 10 year bond – what we used call THE long bond, at 2%

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On top of that we are seeing, what are essentially hot money flows INTO the United States.

Via Kash

Recall from yesterday’s post that MFIs in Europe have drained their bank accounts at European banks by about €700 billion over the past year and half, which at current exchange rates is approximately $1 trillion. It seems that much of that money has recently found its way into the bank accounts that European MFIs keep in US banks. And conversely, it seems likely that the large inflow of cash deposits held at US banks this year is largely from European banks.

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